Tuesday, September 19, 2006

Light, Sweet Crude Oil and Political Levers

First. I love the term "Light, Sweet Crude Oil" vs. what? "Heavy, Sour Sophisticated Oil"?

tristero over at Digby had a great comment about October Surprises. I remember trying to guess October surprises in 2004. And like most official pundits I was wrong. Of course they are always invited back after they continue to guess wrong time and time again, because it's not about if you are right or not, but HOW you say it and WHAT your conservative credentials are. That's all that matters. Any way Tristero makes lots of predictions. The one that makes the most sense to me (which means it probably WON'T happen) is the oil price one.
Frankly I'm still puzzled by the price of oil. Even at the HEIGHT of the gas prices (over $3.50 here in SF) the cost per gallon still seemed too low compared to what oil per barrel was selling at.
I'm not an economist like Atrios or ECHIDNE OF THE SNAKES, just a brain in a box, but the ratios of Price per gallon of oil to price per gallon of gas when it was 20 dollars a barrel vs when it is 69 or 80 dollars a barrel still seems strange.

Just for grins how about some round numbers? Let's say that:

20 per barrel equals 2 dollars per gallon of gas. But...
60 per barrel NEVER was equal to 6 dollars per gallon of gas.
80 per barrel NEVER was equal to 8 dollars per gallon of gas.

Now I'm sure that they come up with all sorts of formulas about why the pricing is as it should be based on history and production and economies of scale, but we all know that pricing is a black art that is NOT straightforward. It is impacted by rumor and fear and news reports of rumors of scary things said by scary people.

And I wonder if the reverse ratio is going to be true. When oil was 3.50 when it was at 80 will it drop back at the same ratio? Will we have gas per gallon until the election that will NOT have the same relationship on the way down as it did on the way up?
So, if they need to keep gas at under 3 dollars a barrel to keep people from voting Democrat will they say, "Hell we can eat the costs for a month or two as long as we keep the current team in congress. Besides, we already didn't take as much cash as we could have and we got into trouble from people for that!"

Anyway, I'm sure that the cartels and companies never act in concert. They just all have the same ideas about the same self interest actions at the same time and justify it the same way. It's "in the air". They don't need to conspire to know that keeping the public happy on gas prices is the one thing they should do to avoid an angry mob that will wake up screaming suing them and passing laws that demand fair pricing (see prop 87).

If the media dont' show real images of war and people's day to day life aren't effected, they don't care. They go about their day, tsk tsk the news and tune into Dancing with the Stars (I'm so glad Tucker Carlson lost!)

If the gas prices don't kill them they won't care. People like me who follow the debt picture, who care about our torturing and killing people from torture will notice this stuff, but most people don't, so it makes sense to me that the Bush admin will do what it can to fix the one thing that has (in the past) got people to FINALLY notice they are being screwed (at least in one area). And if the cartels and companies only have to maintain it for a few weeks, why not? In the mean time they can push all the other crazy stuff that they love to push for the political junkies and to drive the voters in their own base to the polls. "Guns, Gays and God"


Blogger Rich said...

This post has been removed by a blog administrator.

4:45 PM  
Blogger Rich said...

Rummy has the answer:

Rumsfeld Unveils New Justification For Iraq War: High Gas Prices

The fact of the matter is - if Saddam Hussein were still in power in Iraq, he would be rolling in petrol dollars. Think of the price of oil today. He would have so much money.

And he would be seeing the Iranians interested in a nuclear program, he would be seeing the North Koreans developing a nuclear program, and he’d say well why shouldn’t he - and he would. So we’re fortunate that he’s gone.

4:50 PM  
Blogger Jim said...

This is something I actually know an expert on and have asked about. The price of gas is a pretty complex thing and is far more dependant on refinery production rates than the actual price of oil(it's actually the estimated future price that counts) however when production gets hit (aka Katrina) the barrel price has far more impact since the production reserve is much lower. Build more refineries, get lower prices. Now that the gulf refineries have been largely repaired, production is back up. Frankly one of the few democratic ideas that I somewhat agree with is higher gas prices. I wouldn't mind seeing a $1/gallon tax that went right to research. It wouldn't be easy, but like every dime that goes to NASA, it's money in the bank longterm. (although with the current congress, both dem and rep, it's impossible to get tax income to actually get spent on any 1 program, and with real reform we could cut some social welfare programs and not need an additional tax)

6:26 PM  
Blogger betmo said...

i am concerned about home fuel oil as well as someone from the northeast. these oil folks are out to make a profit and get in on the ground floor of the next energy source so that they can continue to make money and profits.

3:43 PM  
Blogger kelley b. said...

Gasoline prices will remain lower, perhaps falling a bit more, until the day after the midterm $elections.

Once the Republicans are sure the Diebolding worked, and they have firm control of both House and Senate again, the price of oil will go to Mars, beotches.

6:33 PM  
Anonymous Anonymous said...

Ya I noticed how gas prices have come down. I drive a hybrid so it does nto bother me so much but still WTF? just in time for election too eh?

5:08 AM  
Blogger Jim said...

Of course there is a government conspiracy to get the price of gas down during the election. In my lifetime not one government program has been successful but Bush, the supergenius we all know him to be, has managed to get the venezuelans, and the saudis ( both of which love us) to drop oil prices and buy more of our stuff, just to keep republicans in office. The inability to put together a complete sentance must be a front!

11:38 PM  
Blogger spocko said...

not one government program has been successful
Not alive during social security or medicare?
They are Cost effective. You of course can define success how you wish. How about the military? Are they not successful? I remember thinking right after the first few weeks of the Iraq war. Well at least they did this part right. Looks like a successful program.
Hmmm. That one could go either way these days.

Jim I really don't think that the gas price thing is an active conspiracy with people calling each other up, but think about the Enron El Paso Gas deal. That was multiple companies working together to game the system. Now maybe they all came to the same conclusion so it doesn't count as a official conspiracy.
But its not as if we can't point to direct examples in the energy industry where people will work a system to their benefit. Now could a bunch of them say. "Having two oil men at the helm and a congress that will do what they say is better for us."? Yes. Might they not get as jumpy about stuff that otherwise raise prices? Yes.
Are they calling each other up to insist they all do it at the same time? Probably not. But then again maybe they don't have to. They might all understand but know enough about RICO to NOT ever write it down. It is just a "TONE" they all agree on separatly.

11:01 AM  
Blogger Jim said...

Spocko, if you're counting social security and medicare in the "win" column the folks down at AARP would like a word. After that have a chat with Algore and let him know. He and a bunch of others (me included)have seen the numbers that show that the only way SS is even still afloat is with massive cash infusions and it still doesn't fill the gaps it's supposed to (let alone that it will inevitably bankrupt us on its present course). The military specifically is not run by the government- it's funded and commanded by the goverment but is solely responsible for its own operations.

You are certainly correct in that an industry (like oil) could get together to try to ensure that the people they like are elected. Any group can get together to try to get someone elected that they think will look out for their interests, obviously an industry will have a lot more impact then the spocko/jim coalition. The civics question of the matter is, what is the mechanism by which the impact of industry is minimized on the political process.

7:12 PM  
Blogger spocko said...


12:12 AM  

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